As AI makes it easier than ever to reach a global audience, is it also making it easier to fail on a global scale?
Agility requires more than just speed; it requires situational awareness. For global brands, this means having the cultural intelligence to understand the nuances of local markets and adapt your strategy in a way that builds trust, not erodes it.
Today, we’re going to talk about a critical paradox facing modern marketers: as technology and AI make global expansion seem easier than ever, the risk of cultural missteps and brand damage has never been higher. We’ll explore why cultural intelligence is becoming the most vital, and perhaps most overlooked, asset for building brand value, and how getting it right is the key to unlocking sustainable growth in a world that is both interconnected and deeply, culturally distinct.
To help me discuss this topic, I’d like to welcome, Katherine Melchior Ray, UC Berkeley, co-author of the new book, Brand Global, Adapt Local: How to Build Brand Value Across Cultures
About Katherine Melchior Ray
Katherine Melchior Ray lectures on international marketing and leadership at UC Berkeley Haas School of Business, CA. With twenty-five-years spent building the world’s best consumer branding across continents, she brings expertise from her time as a senior executive at Nike, Nordstrom, Louis Vuitton, Gucci, Hyatt, Shiseido and Babbel. She has guest lectured at Stanford, Wharton, Brown and Portland State University.
She has been interviewed and featured on CBS 60 Minutes, CNN, The New York Times, The Wall Street Journal, and numerous media internationally. She also has been profiled in The Wall Street Journal in an article entitled, “Hyatt Executive Has a Spare Evening Gown in Her Bag,” and was voted one of the “Most Compelling Women in the Travel Industry” by Premier Traveler magazine. She can be heard on various podcasts and blogs related to global marketing and leadership, culture and diversity, women’s empowerment, and the future of work.
Katherine Melchior Ray on LinkedIn: https://www.linkedin.com/in/katherinemelchiorray/
https://www.linkedin.com/in/natalykelly/
Resources
UC Berkeley Haas School of Business: https://www.zappi.io
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Get a copy of Katherine and Nataly’s book: Brand Global, Adapt Local: How to Build Brand Value Across Cultures
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Transcript
Greg Kihlström: As AI makes it easier than ever to reach a global audience, is it also making it easier to fail on a global scale? Agility requires more than just speed. It requires situational awareness. For global brands, this means having the cultural intelligence to understand the nuances of local markets and adapt your strategy in a way that builds trust, not erodes it. Today, we’re going to talk about a critical paradox facing modern marketers. As technology and AI make global expansion seem easier than ever, the risk of cultural missteps and brand damage has never been higher. We’re going to explore why cultural intelligence is becoming the most vital and perhaps most overlooked asset for building brand value and how getting it right is the key to unlocking sustainable growth in a world that is both interconnected and deeply culturally distinct.
To help me discuss this topic, I’d like to welcome Katherine Melchior Ray, Professor at UC Berkeley Haas School of Business and co-author of the new book, Brand Global Adapt Local, How to Build Brand Value Across Cultures. Katherine, welcome to the show.
Katherine Melchior Ray: Hi, Greg. Thanks for having me. I’m excited to be here.
Greg Kihlström: Yeah, looking forward to this. Before we dive in though, why don’t you uh give a little background on yourself and I I’d love to hear why um you know, the inspiration for the new book?
Katherine Melchior Ray: Yeah. Well, um I have been a CMO um and head of marketing in five different industries across different cultures. So I ended in tech as CMO of Babel in Berlin. And before that, I was CMO of Shiseido, the $2 billion Japanese cosmetics company. But I worked at Nike, I worked at Louis Vuitton, I worked at Gucci. Um and I’m I’m fluent in French and Japanese, I guess, obviously. So I’ve worked all around the world. Um I was also in hospitality, I was in fashion, and I was in television. And the inspiration was that um I teach at Berkeley and so I get students from first of all, all over the country, but also with lots of different interests in different industries and through my coursework, I have thought a lot about what is one of the biggest challenges across industries, across cultures that is very challenging, but also extremely rewarding when you get it right. And it was this notion of how do you keep your brand consistent on a global level while adapting it to those markets in which you do business.
So that was the original inspiration, and I asked Natalie Kelly, who’s CMO of Zapie, to join me for several chapters for her in-depth tech and B2B perspectives.
Greg Kihlström: Great, great, love it. So yeah, let’s let’s dive in and want to start with the the strategic view of this of, you know, just why cultural intelligence is is so important. And the the book certainly argues that it cultural intelligence is an irreplaceable asset in the age of AI. So for the CMO or CEO who thinks that generative AI can just translate and localize content at scale. What’s uh what what are they missing? You know, what what are they are they misunderstanding something and and what’s the strategic risk they’re not seeing?
Katherine Melchior Ray: Yeah. Simply put, AI doesn’t get context. So, I mean, I love AI, um but the even the most sophisticated AI systems, they can analyze patterns and they can predict behaviors, but they don’t fully understand the cultural context that give those behaviors meaning. And people invest in values and values are based on um how they interpret that and the meanings by country. So we refer to something called the algorithmic trust gap, which is the space between what AI can analyze about consumer behavior and what it can understand about building relationships across cultures. Because trust is ultimately the most important relationship between a brand and its customer, and yet that’s not built the same in different cultures. So, I mean, I could explain all about trust and then um what what it really means, um but ultimately, it’s the most important aspect for creating longer-term customer lifetime value.
Greg Kihlström: Yeah, yeah. And and it it seems like the from the from the research, American brands are often losing ground overseas. What what’s the most common strategic blind spots that you see there and how does a more perhaps diverse leadership team, uh specifically, you know, more women in key roles, help in correcting some of these blind spots?
Katherine Melchior Ray: Yeah. The the the biggest single blind spot is thinking that everything in different markets, all the values and the consumer behavior will be the same, and that’s just not the case. Um there is a direct link between diverse leadership and superior performance. Um so it’s so, you know, diversity can get a bad rap in certain countries, but it’s not just a moral or an ethical imperative. It is actually a business strategy proven to drive results. So McKinsey study, this is over 10 years ago. They studied 350 public companies. And the top 25% in ethnic and racial diversity in management actually delivered 35% higher financial returns than their industry average. Yeah. So, um but what’s also fascinating is why this works. So teams with diverse perspectives, and this will make sense to people. First of all, they provide a wider range of cultural insights. Um and they are more willing to point out other people’s blind spots. So what happens is if you can unlock that value of diversity in the way they can behave amongst themselves, the team actually gets smarter through discussion and clarification. And that delivers um greater innovation.
One of the great examples that I I like um because I teach at Berkeley and a lot of people are interested in tech is Airbnb, and people love Airbnb. Most everyone has stayed at an Airbnb. So, um we really understand what it offers and it’s the story about how Airbnb pulled out of China. I think the business case of going into China about 10 years ago when they were looking at it, 2014, 15 is pretty obvious. At the time, um there’s inbound travel and there’s domestic travel and it was the domestic that was growing even faster. Um and so, um I think it was about $500 billion in domestic sales uh and growing over double digits a year. So Airbnb obviously wanted to go in there. Um but what happened after five years of trying, and it even had Chinese investors in um Sequoia China, it pulled out. It’s a pretty scary story of the fact that a couple of things, one, trust didn’t build even by changing their name to Ibeing and localizing the name, even with local investors. And what happened was people were skeptical of home sharing. They didn’t have the same kind of financial systems with a robust credit platform, so both the um homeowners and the travelers didn’t have a third-party trusting system that the Americans were were used to. And local competitors were able to overcome some of the obstacles that Airbnb didn’t because people didn’t really trust whether the rooms would be clean. Um they didn’t trust the photos. So there was just a lack of trust um in the Chinese market to um want to go and stay in what was called a stranger’s unfamiliar home. Um and so after trying really hard and actually one of the two founders flew and and lived in China trying to lead it, uh they pulled out.
Greg Kihlström: Hmm. Yeah, yeah, that that’s a a an expensive experiment uh you know, on many levels, right? So not just financially, right? Yeah.
Katherine Melchior Ray: Exactly. Exactly. And, you know, so a lot of people are say, well, you know, what’s the cost, what’s the cost for this? But you can see, imagine the investment that they put into this market over more than five years, um trying to build their brand, localizing their name, uh creating all the infrastructure, translating the website, um having a business operation and then finally deciding their own um investment was just not becoming profitable fast enough and they pulled out.
Greg Kihlström: Yeah, yeah. So, you know, I think um even outside of, you know, that that’s a lot of physical investment in space, you know, real real estate and and things. I think a lot of companies are also thinking that they can do investments virtual, you know, have have AI help them scale and, you know, I I touched on this briefly in the in the intro, but you know, a lot of brands investing a lot into personalization, localization via AI and I think there’s a lot of promise there, but um your book introduces this concept of the the brand fulcrum to help balance global consistency with local adaptation. Can you walk us through, you know, what what that is and give uh an example of a brand that’s found its fulcrum effectively versus one that’s clearly off balance?
Katherine Melchior Ray: Yeah, okay. So, we introduce a number of different frameworks to sort of help guide people on globalizing and localizing at the same time or glocalizing it, if you will. Um the first one, before I get to the brand fulcris a a Venn diagram about what should be global and what should be local, and it’s this notion of kind of three intersecting circles of the brand’s global values, local cultural values, and then evolving consumer trends. So that’s really the first one where you’re kind of managing everything together. The best brands also will employ a strategy called freedom within a frame, where they create a frame that they say this has to be globally consistent. And then within that frame, we not only want but we actually encourage our local teams to to invent and to innovate in ways that are really uh relevant to their local audience.
The brand fulcrnow, is something that I personally developed when I was at Louis Vuitton in Japan. I was head of marketing and then I became executive director of Gucci. And working with luxury brands, particularly and legacy brands, I realized that sometimes the best brands have this potential to be super elastic by pushing two seemingly opposing trends. Say your tradition or your classics and then innovation and trend, and that the best brands push in both directions simultaneously. And that creates when it it reaches a larger audience, it creates elasticity um in the brand that drives relevance as a market, as you either enter a new market or as the market itself changes.
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And so, you know, building this, um not only building this this cultural um I guess the flexibility to be, you know, both global and and local, as well as building culture intelligence in an organization, it’s it’s not a one-time thing. It’s not like we’re going to do this campaign and then all of a sudden the the brand will be understood. It’s more about embedding it into the the organization’s DNA. For a large and yet centralized marketing team, you know, what’s what are the first few tactical steps to to start building this cultural intelligence, you know, thinking about people, process, platforms, things like that?
Katherine Melchior Ray: I it’s always people, right? It always comes down to people. I think, and particularly here, um it’s that when we talk about cultural intelligence, in the book, we break it down as to what is actually what do we actually mean by it. And there are actually four key steps to building cultural intelligence. The first thing starts with your attitude. So right then and there you realize it has to start with the people.
Greg Kihlström: Right.
Katherine Melchior Ray: And so hiring the right people, getting the right leadership that can again unlock that uh value of diversity that I I talked about earlier is really one of the most important aspects about it. Um past once you get under um once you have the right attitude, then you can learn to develop your awareness. And when you become very aware, you start to understand an audience that may not be someone like you, not only by observing the data and the analysis, but actually what I like to say is listen to the market and learn to listen with your eyes. So get out in the market and a lot of consumers will communicate beyond words. In America, we’re so used to words being the final contract, the final word, the final email. But in many other cultures, people communicate nonverbally. And so if you can develop your awareness, you both develop you will start to understand things that you do, maybe um intentionally or inadvertently, and you also understand learn to understand what other people do. So the first part’s the added about the attitude, which is why it’s people. The second part is awareness. The third part is learning the skills, um learning about the different cultures, and finally, the last part is practicing all of that and wrapping it all together and it’s an ever ongoing process and we’re always making mistakes, we’re always getting better, we’re learning to um it’s called culture flex by adapting to one market and then adapting to the other.
Greg Kihlström: Yeah, yeah. But yeah, I mean to to your point there, you know, I definitely there’s there’s a lot of differences in communication between, you know, high context, low context. There’s lots of different dimensions to to look at that as well. But you know, I wonder a global brand you kind of have to distill things into something centralized that then gets localized again, but I mean, would it it it sounds like starting with a diverse and and a more diverse starting point for lack of a term, even if it has to get centralized then into something that’s that’s global. It seems like that would at least set it up to be better um or easier or more effective to then localize again, right? Is that
Katherine Melchior Ray: Yeah, well, if you embed this knowledge in your teams, then they can adapt from one market to another because you’ll always have your tech processes, you’ll always have your platforms. Those will also always be evolving. Um but if you embed the learning and the insight and the awareness into your teams, they will be able to multitask across multiple markets. Moreover, each person, whether they’re in the headquarters or out in the regions, they have different roles to play. And so they have to learn to trust one another while the people in the regions are working to create trust with the consumer. And so that notion of how to build trust across culture becomes really important, not only on the market side, but also on the internal corporate side.
Greg Kihlström: Yeah, yeah, makes sense. So let’s uh let’s talk a little bit about how we measure this. And so for some, you know, cultural alignment can feel a little uh ambiguous or like a soft metric perhaps, but its impact is as as you’ve already shared is is very real and um and you know, the the book also cites um a high degree of of brand failures due to lack of of cultural alignment. So how do you advise leaders to measure the success of their cultural adaptation efforts and what what kind of leading indicators would you say um demonstrate that an organization’s on the right track?
Katherine Melchior Ray: Mhm. Uh it depends what your challenge is. You know, different brands have different challenges in different markets, um because not all marketing budgets um work if they’re aimed at the wrong problem. So let’s look at two of the most common ones. One is um a reach problem, right? I want to increase my awareness. Well, that’s solved at top at the top of the funnel, right? And so the teams that own that are the growth teams, the performance teams and there’s a very clear way to solve that through um paid media owned and earned um or distribution. However, if your problem is really one of brand equity or conversion, it’s not about awareness. That’s a perception, uh reputation, and trust factor. Those are much harder to solve and it’s not just something that’s done by one part of the company, it’s really not just a marketing problem, though it’s usually brought into the organization by the marketing team. This is really everybody’s job to solve whether it’s marketing, product, customer success, service, and leadership at the end of the day. And this has to be then solved with um very consistent experience that takes into account the cultural alignment. And so depending on what your brand challenge is are, you’re going to look either at changes on the awareness side for the first challenge or earliest indicators on the brand equity side. You know, that might be um organic conversion and um repeat customers. So it really depends on what challenge you have in which market.
Greg Kihlström: Yeah, yeah. And then thinking thinking a little longer term. Obviously, beyond the the risk mitigation part, the, you know, costly public mistakes uh that that might be avoided. Um what about things like you had mentioned long-time loyalty, things like customer lifetime value, long-term brand equity? Um how does, you know, how how might you connect the dots for a CFO who might be, you know, looking at localization as kind of a cost center?
Katherine Melchior Ray: Uh it’s funny because, you know, you we hear this all the time and I would say for a CMO, your CFO has to be your best friend.
Greg Kihlström: Yeah.
Katherine Melchior Ray: Right. Yeah. And you have to realize that this aspect of your the cultural intelligence of the brand, it will show up in the P&L through higher retention, better margins, um lower acquisition costs over time. So it’s really important to not expect it to be you know, either just a cost center but um a multiplier of your customer lifetime value. Right? This is where it comes back to trust because building trust actually reduces the churn and um the price sensitivity over time. So loyal customers um will not want to brand switch, um if, you know, there’s a recession or um they’re lost a job or something like that. Loyal customers are loyal. You know, so they really are an insurance um for downturns in in the market. So, you know, to the CFO, it’s basically you got to tell them that you either invest up front in understanding the culture or you’re going to pay repeatedly to fix misunderstandings over time.
Greg Kihlström: Yeah, yeah. And so then, you know, look looking at uh certainly there’s there’s a lot of even at the at the board level, there’s a lot of pressure to implement and adopt AI into all things. You know, we both mentioned, you know, the AI certainly can enable marketing to scale to to levels that it previously just wasn’t wasn’t possible even with large marketing teams. How do you see the relationship between AI and cultural intelligence evolving um you know, beyond I know there’s talk of AI replacing jobs and all that stuff, but you know, is it um you know, instead of thinking of it as a replacement for human insights, you know, is there a way that marketing leaders can use AI to enhance cultural intelligence and make better and more culturally informed decisions?
Katherine Melchior Ray: Yeah. Well, I think the important thing is to realize they’re both important and the the way to frame it is to use AI to enhance human or cultural intelligence. Um because ultimately insight doesn’t live in the data. It lives in the interpretation. You know, there there are many times you can get information and the way people interpret what that says will change everything both for the consumer and then also for the company in terms of what they’re going to do about it. So, I think for the board, it’s really important. I think everyone knows we have they have to always invest in tech, but you have to also invest in teams and in their education of how to use AI in the support of human or cultural intelligence. You know, I think if if one of the things is to look at some of the companies that are very successful at this around the world in different industries. Um I was in cosmetics as CMO of Shiseido and I was brought over there to help the company internationalize and learn how to compete in and they would often say Boston and Beijing, right? Two completely different markets, um both of which would look Instagram first, whereas Japan is still a market where 90% of households um can be reached through television. So that is something that you have to understand the cultures and change how you work. So if you look at L’Oréal, for instance, it understands and respects, um the differences in culture and that it embeds that in its local teams. And so it has local teams all around the world. Um and that’s an example from cosmetics. I mean, you can look at, you know, Unilever and um General Electric and a lot of these global companies that have divisions all over the world and they will invest in their employees to live in different parts of the world so that we can understand it and bring those insights back to either headquarters or a region so that that builds the trust, um and the flexibility between the teams to do what the local teams really need.
Greg Kihlström: Yeah, yeah. Well, and and just given uh the the continued rapid pace of of change here and certainly um not only global global expansion, but just everything from, you know, agentic commerce to all all of the things that are happening and and certainly will happen over the years to come. You know, what what would your advice be to a marketing exec to, you know, to best future proof their their brand’s global strategy over the next several years?
Katherine Melchior Ray: well, I think being humble is probably one of the most important aspects of a marketer, being both um realizing there are things you don’t know uh and things that are misleading and always be looking to challenge yourself on what is it that I’m not understanding. Um and in order to to get past that, you need to really build a trust-centered strategy for global growth that again interprets AI and all the new technologies with cultural intelligence. Um so that really starts by building a trust landscape. Uh always stay close to your consumer as I talked about, get out in the marketplace, look at them, read them, watch them, and learn to again interpret them. That’s why you need cultural intelligence, so that cross-cultural agility becomes very important. And create a cultural feedback loop. Trust is talked a lot about, but what is it? At the end of the day, I think trust is built out of three things. It’s a um platform of shared values, so you have to be able to know what they are between you and someone else. It’s an open and transparent communication so that you can speak and get open honest feedback. And the third part is a history of promises kept. So you have to be able to have a feedback loop. Um and then, of course, we know if we don’t measure it, we don’t know what it is. So you need to measure that trust across context. So you can develop different metrics that can capture trust um that take into account different forms of expression where some are more explicit and some are more implicit. But it all comes down to really uh investing, I think, in um a strategy of trust in your people and in your target customer.
Greg Kihlström: Yeah, yeah, I love that. Well, Katherine, thanks so much for for joining today. Just a couple of questions before we wrap up here. First one, uh if we were having this interview one year from now, what is one thing that we would definitely be talking about?
Katherine Melchior Ray: I think the fact that we are continuously learning and that we are always being surprised, so we’re always having to stay agile.
Greg Kihlström: Yeah, love it. And last question for you. Uh what do you do to stay agile in your role and how do you find a way to do it consistently?
Katherine Melchior Ray: I really appreciate when my students or my clients uh challenge me and um they help me see my own blind spots. And as we discover those blind spots in ourselves, uh we grow and we gain new perspectives, new insights and that stretches us so that we can take on bigger, larger challenges.
Greg Kihlström: Nice. I love that.
Katherine Melchior Ray: So thanks for having me, Greg. It’s been a really great program. I really appreciate all your questions and I hope other people may be interested in taking a copy of our book, Brand Global Adapt Local.
